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7/31/2011

 Table of Contents
  • Status of Key Market Parameters
  • Silver Index is Still in “Bump-and-Run” Pattern
  • Broad Stock Market is Waiting for a Big Move
  • Market Volatility is above the Panic threshold
  • Gold Index is in “Three-Peaks and Domed House” Pattern
  • US Dollar is above the Upper Boundary of 14-Month “Falling Wedge” Pattern
  • Asset Class Performance Ranking with Gold Leading
  • Sector Performance Ranking with Energy Sector Leading
  • BRIC Stock Market Performance Ranking with Russian Market Leading

Current Status of the LWX (Leading Wave Index)

The LWX Indicator in Last Four Weeks (Past)

The LWX Indicator in Next Four Weeks (Forecast)


Broad Stock Market is Waiting for a Big Move
The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total equity market, has been in a 7-month horizontal channel (i.e. a trading range). Currently the market is below the 89-day moving average and it is in the choppy zone of the horizontal channel with negative readings of both the trend and momentum. The Leading Wave Index (LWX) indicator, color coded in the price bars of the following daily chart of the Wilshire 5000 index, closed in bearish on Friday. The LWX forecasts that next four weeks should be in a bullish time-window for the broad equity market. The dramatic resolution on emergency legislation to avoid the nation’s first financial default should boost the market to test the upper boundary of the 7-month trading range.


Broad Market Volatility is above the Panic Threshold
The Broad Market Volatility (BIX), measured from over 8000 U.S. stocks, closed at 245 on Friday, and it has a volatility spike here.  This reading is relative extreme in the short-term and it is above the panic threshold level of 45. The BIX above the panic threshold indicates that the current market is bearish. The BIX is plotted in the following chart as compared with the Wilshire 5000 index.
 

Silver Index is Still in Bump-and-Run Pattern

The silver index had a pullback in the “Run” phase. We will see if it returns to the Lead-in Trendline in the coming week. The downside price target is projected at around $32/oz by the target line which is parallel to the lead-in trendline and is distant from the lead-in trendline with the same lead-in height.


Gold Index is in a 10-Month “Three-Peaks and Domed-House” Pattern

The gold index now is in the “Roof” phase and still faces a potential risk of the “Plunge” phase.  Recently the gold index has established an inverse relationship with the S&P 500 index.  If the S&P 500 index is boosted by the positive outcome of the debt ceiling debate, gold could have a bearish reversal from here.


U.S. Dollar is above the upper boundary of 14-Month Falling Wedge Pattern
The US dollar index is above the upper boundary of the 14-month “Falling Wedge” (see here) pattern which is a bullish reversal pattern. Now the upper boundary of the falling wedge becomes a support line.


Asset Class Performance Ranking with Gold Leading
The following table is the percentage change of each asset class (in ETFs) against the 89-day exponential moving average (EMA89). Currently gold and treasury bond are outperforming. The US dollar and oil are underperforming.


Sector Performance Ranking with Energy Sector Leading
The following table is the percentage change of sectors and major market indexes against the 89-day exponential moving average (EMA89). The Dow Jones Wilshire 5000 index, as an average or a benchmark of the total market, is 1.48% below the EMA89. Outperforming sectors are Energy (+1.40%), Real Estate (+0.25%), and Technology (+0.21%). Underperforming sectors are Banks (-5.62%), Semiconductors (-4.26%), and Telecommunication (-3.86%). The NASDAQ 100 (+1.64%) is outperforming the market, and the Russell 2000 Small-cap (-2.47%) is underperforming.
 

BRIC Stock Market Performance Ranking with Russian Market Leading
The table below is the percentage change of the BRIC stock market indexes against the 89-day exponential moving average (EMA89). The Russian market is outperforming the U.S. market, and the Brazilian, Chinese, and India markets are underperforming the U.S. market.
 
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  1. August 1, 2011 at 9:22 pm

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